Africa has over the years lagged behind other continents in development. Poverty, disease and political instability have continued to be a thorn in the flesh for the continent and have hindered development. Inflation has been a natural effect of these factors, with some countries like Zimbabwe having their economies brought to its knees by the runaway inflation.
The people of Africa have continued to turn to innovation to solve their problems. The Kenyan mobile money ecosystem is globally renowned for its high uptake by Kenyans; the Cardiopad in Cameroon is saving the lives of millions who live in remote areas; the charging shoe allows Africans without access to electricity to charge their devices; these are just a few of the continent’s innovative solutions to their everyday problems.
With globalization becoming a major driver of any economy the world over, Africa has to open up itself to interaction with other continents. While international trade between Africa and the other continents, mainly Europe and North America, has been going on for centuries, the transfer of funds from Johannesburg to New York or from Madrid to Nairobi has continued to be expensive, slow and cumbersome. Africa produces a lot of raw materials which it exports to other continents. The payment for these goods is usually paid through SWIFT platform and the producers get to collect their payment after averagely five days from their bank.
Ripple’s remittance platform could change all this and help Africa drive its economy forward. First, Africa’s mobile phone adoption is quite high and the people are taking advantage of the internet through their smartphones. Using mobile wallets for Ripple, the people can receive payments in seconds from the comfort of their homes. This will help them avoid the very high rates that the banks in Africa charge.
A recent report by the World Bank has placed the remittance cost in Sub-Saharan Africa as the highest in the world at 11.5%. This is twice the cost in Southeast Asia! This is despite remittances being crucial to the continent and in some countries like Liberia, Lesotho and Gambia, making up as much as 20% of the GDP. The report attributed the high cost to flawed financial regulations and the concentration market power of banks. Exclusivity agreements in which only a few banks have the right to process remittances by major remittance firms like Western Union and MoneyGram further restricts any form of competition and leaves the Africans with little choice.
The market in Africa is ideal for Ripple whose purpose is to revolutionize the remittance process. Asian, European and American banks have already jumped on the Ripple bandwagon and are using the RippleNet platform to reduce time taken and cost incurred for remittances and it’s a high time African banks did this too. This would change the wheels of fortune for Africa and steer it towards widespread development and a greater contribution to globalization.